Friday, 8 July 2016

⃰ DPhil Candidate, University
of Oxford. Academy of Athens and Modern Law Review scholar.

The
Advocate-General’s recent opinion
in CJEU Case C-201/15 AGET Iraklis is
both interesting intellectually and significant politically. AGET Iraklis,
which is a subsidiary of LafargeHolcim, is active in the fields of
manufacturing, distribution and marketing of cement and has three plants in
Greece. As the construction sector took a heavy blow from the economic crisis,
AGET Iraklis’ sales plummeted and the company sought to reorganise its
business. Under Greek law, a company seeking to carry out collective
redundancies has to consult with the workers’ representatives prior to taking
action. It was disputed
during the hearing whether the company had indeed done so. More importantly, the
Minister of Labour is given the power to extend the deadline for such
consultations or to refuse to authorise some or all of the projected
redundancies. It was the exercise of the latter power by the Greek Minister of
Labour which gave rise to the dispute in the main proceedings (Greek Council of
State (Fourth Chamber) Decision no 1254/2015).

The
company sought to argue that the impugned national rule was not compatible with
Council Directive
98/59/EC on the approximation of the laws of the Member States relating to
collective redundancies and Articles 49 (freedom of establishment) and 63 (free
movement of capital) of the TFEU. The Greek Council of State, which is in many
ways the supreme administrative court of the land, asked the CJEU whether the
contested rule contravened the aforementioned rules and in case the answer to
the preceding question was in the affirmative, whether it could perhaps be
justified ‘if there [were] serious social reasons, such as an acute economic
crisis and very high unemployment’.

The Advocate General opinion

AG
Wahl delivered his opinion
on the case on 9 June 2016. He argued that the impugned national rule was ‘wholly
unconnected’ to Directive 98/59, insofar as that directive ‘[did] not govern
the employer’s freedom (or lack thereof) to effect collective redundancies’. As
such, Directive 98/59 did not preclude, said he, the enactment of the contested
provision (paras 23-34 of the opinion).

As
regards EU primary law, AG Wahl opted to examine the contested national rule
from the standpoint of the freedom of establishment (paras 35-45). He argued that
a requirement for prior authorisation of collective dismissals constituted a
restriction on freedom of establishment (para 47). ‘Indeed, in the main
proceedings the rule at issue limits an employing undertaking’s freedom to make
collective redundancies since, unless the rule is complied with, those
redundancies will be invalid. Such a rule thus directly interferes with the
internal organisation of undertakings and with the management of their staff,
possibly exposing undertakings to the risk of operating at a loss.’ He further argued
that Article 49 TFEU should be interpreted in the light of Article 16 of the EU
Charter of Fundamental Rights (freedom to conduct a business) and that the
impugned national rule restricted the exercise of the latter freedom (paras
49-50).

The
Greek Government sought to argue that the contested rule was justified on the
ground of the protection of workers, which is an overriding requirement in the
public interest. The impugned law provides that applications to carry out
collective dismissals are to be considered on the basis of the following
criteria: ‘the conditions in the labour market’; ‘the situation of the
undertaking’; and ‘the interests of the national economy’. Authorisation is a
condition for the validity of the redundancy measures.

AG
Wahl argued (para 66) that the interests of the national economy ‘involve[d] a
purely economic objective which [could not] justify restricting the freedom of establishment
(nor the freedom to conduct a business)’. As regards the conditions in the
labour market and the situation of the undertaking, these criteria were, said
the Advocate General, ‘neither appropriate for achieving the objective of
protecting workers, nor limited to what [was] strictly necessary in order to
achieve that objective’ (para 67).

As
regards the conditions in the labour market, AG Wahl noted that, in the event
of an administrative refusal to authorise the planned redundancies, the workers
would fare even worse, since ‘that undertaking would have a clear incentive to
commence proceedings for its dissolution and winding-up, after which it would
no longer be bound by Directive 98/59 … and, presumably, would not have
the funding required to remunerate the workers concerned in the event that the
rule at issue were to continue to apply to such a situation’ (para 68). ‘That
would, incidentally, also endanger the jobs of those workers who have not been
made redundant.’ As such, AG Wahl expressed his ‘doubts’ as to whether ‘the
rule at issue might contribute, in any meaningful way, to lowering the
unemployment rate’. In any event, this criterion was not suitable, said he, for
achieving the objective pursued, as ‘it [did] not remedy the problems which [had]
made the employment situation of the workers concerned uncertain’ and
essentially ‘amount[ed] to denying the employers’ right to terminate an
employment relationship on the ground that it [was] generally not desirable to
have more unemployed persons’ (para 69).

As
regards the possibility to rely on the situation of the undertaking for the
purposes of blocking collective dismissals, AG Wahl noted that the contention
that the authorities of a Member State might be better suited than the
management of that undertaking to determine what is most appropriate in its
situation struck him as ‘nothing less than remarkable’ (para 70). ‘At any rate,
I do not find it appropriate to protect workers by letting an authority
overrule the business decisions ultimately taken by the employing undertaking.’
He added that:

Moreover, as argued by the Company, the statutory criteria are
unclear and afford excessively broad discretion to the administration, to the
detriment of the legal certainty of the employers. This, in fact, appears to
frustrate from the outset any possible attempts at reaching a friendly
settlement between the employers and the workers by doing away with the need
for negotiations – as witnessed in the matter under consideration. An alternative
might have consisted in listing the types of dismissals considered to be
unjustified, as in the case of the list which appears in paragraph 3 of the
section of the Appendix to the Social Charter relating to Article 24
thereof (para 71).

Furthermore,
the Greek Government failed to show, said the Advocate General, that the
impugned measure complied with the principle of proportionality, nor did it
provide in his opinion specific evidence substantiating the arguments raised
(para 72). He added that:

Indeed, by restricting the employer’s ability to dismiss the
workers collectively, the rule at issue merely gives the impression of being
protective of workers. To begin with, that protection is only temporary until
the employer becomes insolvent. Even more importantly, workers are best
protected by an economic environment which fosters stable employment.
Historically speaking, the idea of artificially maintaining employment
relationships, in spite of unsound general economic foundations, has been
tested and has utterly failed in certain political systems of yesteryear. That
provides confirmation that, in laying down an effective yet flexible protective
procedure, Directive 98/59 affords genuine protection for workers, whereas a
system of prior authorisation such as that at issue, which tellingly falls
outside its scope, does not (para 73).

As
such, the Advocate General concluded that the impugned rule was not suitable
for the attainment of the objective pursued and that, in any event, it went beyond
what was necessary to achieve that purpose (para 76). Moreover, ‘the presence
of an acute economic crisis accompanied by unusual and extremely high
unemployment rates’ was said to be incapable of justifying the impugned
restriction (para 77). This was, said the AG, because ‘[t]hose circumstances,
although clearly very serious, [could not] justify restricting the freedoms of
establishment and to conduct a business when the statutory criteria [could not]
do so on their own’; ‘an acute economic crisis and very high unemployment rates
amount[ed] in themselves – at least in part – to purely economic factors’; ‘the
socio-economic effects resulting from collective redundancies [were] felt in a
given local context and social environment, not at the national level’; and
‘there [was] no reason to believe that a severe economic crisis would not
affect businesses just as much as workers’ (paras 78-79). The AG further noted
that ‘as the Commission state[d], in times of crisis, it [was] just as
important to reduce all the factors which deter[red] new undertakings from
investing, as economic efficiency [might] help stimulate job creation and
economic growth’ (para 80). ‘That, I presume, is the reason why Greece, as a
condition for the financial assistance provided by the European Stability
Mechanism, accepted to “undertake rigorous reviews and modernisation of
collective bargaining, industrial action and, in line with the relevant EU
directive and best practice, collective dismissals, along the timetable and the
approach agreed with the Institutions. On the basis of these reviews, labour
market policies should be aligned with international and European best
practices, and should not involve a return to past policy settings which are
not compatible with the goals of promoting sustainable and inclusive growth”.’

Commentary

The AGET
Iraklis case arose from the Greek crisis and gave rise to the first Article 267
TFEU preliminary reference from the Greek Council of State to the CJEU in this
context. Although the impugned rule was not used as a ‘vehicle’ for indirectly
challenging the bailout terms agreed between Greece and its creditors, the case
could nevertheless be said to form part of a group of cases brought before the
CJEU concerning the legality of national economic policy measures that were enacted
in response to the economic crisis. These include the Romanian MoU cases (Cases
C-434/11,
C-462/11,
C-134/12,
and C-369/12);
the Portuguese MoU cases (Cases C-128/12,
C-264/12
and C-665/13);
a couple of Greek cases concerning a Council decision adopted within the
framework of the excessive deficit procedure (Cases T-541/10
and T-215/11);
and a number of cases arising from the Cypriot banking crisis (Case T-327/13;
opinion
in Joined Cases C-8/15 P, C-9/15 P and C-10/15 P; opinion
in Joined Cases C-105/15 P to C-109/15 P; see comments
by René Smits).

There
is no doubt that the impugned national rule in AGET Iraklis might hinder or render less attractive the exercise of
the freedom of establishment, which includes the right of departure from a
Member State. It might further constitute a restriction on the freedom to
conduct a business which is enshrined in Article 16 of the EU Charter. The application
of the Charter is triggered insofar as Greece could be said to derogate from
the freedom of establishment. The relationship between the freedom to conduct a
business and workers’ rights is clearly complex (see the report
by the European Union Agency for Fundamental Rights, Freedom to Conduct a Business: Exploring the Dimensions of a Fundamental
Right (pages 9-10), and exigencies of space preclude detailed analysis of
this. However, it should be noted in this connection that Article 16 of the
Charter can be and indeed is used by corporations to challenge various
regulatory requirements which are seen to stand in their way, as evidenced by
the factual background to the recent Lidl
judgment (in which the argument was unsuccessful).

The Court
rulings in Viking
Line and Laval
set the pace for the relationship between fundamental economic freedoms, on the
one hand, and collective labour rights, on the other. Depending on what the
Court’s ruling will be, AGET Iraklis might as well soon form part of this group
of cases and could also be said to be linked to the Court’s ruling in Alemo-Herron.
The reader might perhaps be struck by the tone of the AG opinion, but the reality
is that the AG undertakes a careful and balanced analysis of the relevant
substantive issues. This is perforce conjecture, but the Court might as well
follow the AG opinion, albeit with slightly different wording.

Taking
a step back from the pressing legal questions facing the Court in the AGET
case, it is clear that the applicant in the main proceedings was caught between
a rock and a hard place. Construction activity had come to a grinding halt, but
AGET Iraklis failed to obtain the requisite ministerial authorisation and
therefore could not carry out collective dismissals, which were a vital part of
its restructuring plan. It could only lay off its workers at a pace which would
not be caught by the national rules on collective dismissals, but the lay-offs
in one of its plants were reportedly
found by lower courts to be invalid. On the other hand, the workers that
would have been affected by the actions of the company would have been left
without a job in a country where the unemployment rate was, according to the
order of reference, 27.3% in 2013. The rate for 2014 was 26.5% (note 25 of the
opinion), which was clearly not much better either.

It
is important to note that the AG opinion leaves some scope for a more
‘balanced’ rule which would not undermine the effectiveness of prior
consultations (para 71 of the opinion).[i] What is
nevertheless noteworthy is that the AG concluded his opinion with reference to
the bailout terms agreed between Greece and its creditors. Had the Court been
asked to rule on the validity of these terms from the standpoint of EU law, it
would have probably declined jurisdiction, as it did in the Romanian and
Portuguese MoU cases. It remains to be seen whether ‘two-pack’ legislation will
have an impact in this respect. Be that as it may, the point of controversy in AGET
Iraklis might soon become moot, as the relevant issue will be negotiated
between Greece and its creditors in the second review of the ongoing ESM
programme in the fall of 2016.

For
detailed discussion of the legal quality of the bailout terms and the scope of
application of the EU Charter, see Catherine Barnard, ‘The Charter, the Court –
and the Crisis’ (2013) University of Cambridge Faculty of Law Legal Studies
Research Paper 18/2013; Paul Craig, ‘The Eurogroup, Political Power and
Accountability’ (Governing Finances in Europe: Shifting Regimes and Shifting
Powers conference, Uppsala, 27-28 May 2016); Alicia Hinarejos (above) 131-36; Claire
Kilpatrick, ‘Are the Bailouts Immune to EU Social Challenge Because They Are
Not EU Law?’ (2014) 10 EuConst 393; Koen Lenaerts, ‘Exploring the Limits of the
EU Charter of Fundamental Rights’ (2012) 8 EuConst 375; Steve Peers, ‘Towards a
New Form of EU Law? The Use of EU Institutions outside the EU Legal Framework’
(2013) 9 EuConst 37, 51-53; Napoleon Xanthoulis, ‘The Participation of Union
Institutions in the European Stability Mechanism: Between International Law
Competences and EU Treaties Restrictions’ (Jean Monnet Doctoral Workshop, City
University of London, 23-24 June 2016).